The Michigan Strategic Fund, made up of board members from the Michigan Economic Development Corp., will decide next week whether to approve new requests from the city of Grand Rapids for Renaissance Zone extensions.

Then a few weeks later, property owners in the city's first zone will start paying a portion of the taxes that they've had exempted since 1997.

Beginning on Jan. 1, most of these owners will be facing payments totaling 25 percent of the exempted taxes for 2009. The taxes are the Michigan Business Tax, the 6-mill state education levy, the city income tax, and real and personal property taxes. Residents who live in the zone will also begin paying 25 percent of the state income tax next year.

A return of these properties to the tax roll comes at a good time for city, county and state governments, as all three are struggling to balance budgets. For example, a forecast from the city shows that Kent County will receive an estimated $209,000 in property-tax revenue next year from the winding-down of the zone's nearly tax-free status.

And without the county's consent, since state lawmakers gave counties veto power over extensions, the new requests wouldn't have gone to Lansing.

"Our office worked very hard to reach compliance with the county," said Kara Wood, city economic development director. "We have an agreement; we have consent from the county."

The agreement calls for the city's Economic Development Corp. to reimburse the county for all property-tax dollars it will lose from the zone extensions because the city exempts and abates 12.3 percent of its total tax roll. A county policy forbids it from entering into any tax-capture scenario with a jurisdiction when that unit exceeds 10 percent of its tax roll in tax giveaways. The county recently amended its policy to let such requests go forward if its tax revenue is returned.

City Manager Kurt Kimball said the city will fall below the county's threshold in 2011. So the county may only receive a reimbursement for two years and could lose revenue for 10 years to the extensions, if the state approves the requests for the full 12 years.

Wood told the Business Journal that had the agreement been in effect this year, the EDC would have had to reimburse the county $750 for the millage revenue it would have lost to the properties that are seeking extensions. She said True North Architecture, Construction and Investment, Via Design and Wealthy Street Historical Development LLC — the firms filing the extension applications — will each cover its share of the EDC's refund to the county.

True North owner Dan Henrickson plans to invest $1.9 million into renovating a two-story building at 607 Dewey Ave. NW and adding a third floor to it, raising the structure's total square footage from 15,277 square feet to 20,131 square feet. True North would move from its current site in Belmont to the Dewey address and also lease space to other tenants who are reportedly interested in the site.

Henrickson said the renovation will be LEED certified and will have solar panels and wind turbines installed on the roof to power the building. He also said the project would bring about 30 jobs to the city and add about $11,000 each year to the city's income-tax roll.

Via Design proposes to spend $300,000 to renovate a 4,000 square foot building at 563 Grandville Ave. SW to expand the firm's services. The custom furniture design company plans to use the building for light manufacturing, to create a retail showroom and to develop a line of office furniture. The additional address would allow Via Design to make pieces that it now buys from suppliers.

Scott Sikkema of Via Design said the project would create up to 10 new jobs and add $1,400 to city income tax annually.

City commissioners granted True North and Via Design full zone extensions that keep the properties nearly tax-free through 2023. But they only gave the third applicant, Wealthy Street Historical Development, half of an extension — despite the fact that WSHD is the only one of the three that already owns its property. The extension is for the full duration of 12 years, but only for the lower half of the two-story structures the developer wants to renovate at 532-536 Wealthy St. SE.

WSHD bought the two small buildings, with a total of 12,000 square feet, in August 2007. Together the two structures have a taxable value of $48,000. Todd Ponstein said his firm would invest $1.2 million for ground floor retail space and upper level condominiums. He also said the retail portion of the project would create up to 16 new jobs and generate $3,300 in new income-tax revenue for the city, while the condos would likely have from eight to 12 residents.

But city commissioners didn't include the residences in their extension approval for the project, so only the ground floor will have a zone designation if the state OKs the request Dec. 17. The city's Economic Development Project Team approved both floors of the WSHD project earlier this fall.

As for the other two applicants, Wood said both hold options to buy their targeted sites and will do so if the extensions are granted next week.

"These owners don't own the properties yet and they won't buy them without the Ren Zone," said Wood.

Dewey ET Third LLC owns 607 Dewey, the building True North wants to purchase. It has a taxable value of just over $52,000. Four Star Design LLC owns 563 Grandville, the structure Via Design plans to buy. It has a taxable value of $38,600.

All three properties have been part of the city's zone since 1997, when commissioners named six areas across the city with tax-exempt status. The city added four more areas to the zone in 2003 when the state created a second round that expires Dec. 31, 2017.

The newer zoned areas include a few blocks of Monroe Center and the former southeast side site of Metro Hospital that Beacon Hill at Eastgate is hoping to redevelop into upscale housing for seniors. Beacon Hill has asked the city for tax-exempt bonds for its project.

The city reported there are 800 properties in both zones that have drawn investments totaling $251 million.

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